Oil-rich Kuwait faces reckoning as debt crisis looms

DUBAI, United Arab Emirates (AP) — When Kuwait emerged from a monthslong coronavirus lockdown, hundreds of Kuwaitis flocked to reopened stores, the lines clogging malls, snaking through hallways and spilling onto sidewalks.

But unlike much of the world, where long lines formed for donated food, Kuwaitis were waiting to buy Cartier jewelry.

The jewelry-store rush by Kuwait's long-coddled citizens is a symptom of a looming disaster. Kuwait, one of the world’s wealthiest countries, is facing a debt crisis. The pandemic has sent the price of oil crashing to all-time lows and pushed the petrostate toward a reckoning with its longtime largesse, just as a parliamentary election approaches in December.

“COVID, low oil prices and the liquidity crisis have all come together in a perfect storm,” said Bader al-Saif, an assistant professor of history at Kuwait University.

Like other Gulf sheikhdoms, Kuwait provides cushy jobs to roughly 90% of citizens on the public payroll, along with generous benefits and subsidies, from cheap electricity and gasoline to free health care and education.

This fall, the ratings agency Moody’s downgraded Kuwait for the first time in its history. The finance minister warned the government soon wouldn’t be able to pay salaries. Kuwait’s national bank said the country's deficit could hit 40% of its gross domestic product this year, the highest level since the financial devastation of the 1990 Iraqi invasion and subsequent Gulf War.

With crude oil prices just above $40 a barrel, other nearby Arab states took on debt, trimmed subsidies or introduced taxes to sustain their spending. Kuwait, however, did none of that. Its break-even price for this year's budget was $86 a barrel, double current sales figures, putting its finances under...